Simple Liberty  



Reflections From The Front Porch

Debt Is Bondage

Written by Darrell Anderson.

One of the easiest ways to lose your liberty is to accept debt obligations. Debt is a four-letter word and like many four-letter words, is something to be avoided for many people. Debt is another way of saying bondage. Indeed, for many people debt is pure slavery. Because all humans are constrained by the time domain, and exchanges of wealth do not occur instantaneously, all people incur some degree of debt. Debt is sometimes necessary and unavoidable, but excessive debt rarely leads to a life of liberty.

I am not talking about the usual expenses to support life. Everybody must provide shelter, food, heating, clothing, etc. No living human can eliminate the basic requirements of living. Therefore, every individual must produce in order to consume. Everybody must consume — even a minimal amount — if they hope to survive. There is no way around that fundamental fact of life. Perpetual motion is impossible.

People can reduce the cost of necessary expenses, although there are practical limits. They can learn to live more conservatively to reduce electric utility and heating expenses. They can learn to walk to the corner store instead of jumping into the car. They can live in a modest and functional home rather than indenturing themselves for 40 years with mortgages and second mortgages. Although everybody wants to enjoy life and pursue happiness, most people probably can find ways to reduce “frivolous” spending. People can reduce costs, but only if they want to.

Unfortunately, many people justify extra expenses as needs rather than as wants. Consider transportation. Many people decide they “need” a new car, opting for a new automobile. They love the newness and the smell. They like the new gadgets and technology. They like the status. They greatly dislike the price tag and monthly bill. On a five-year loan, market exchange value depreciation means most buyers have no equity in an automobile for about three years. However, a bit of cognitive dissonance eliminates those concerns.

By choice, this kind of excessive debt keeps many people from getting ahead and living a life of liberty.

A used car, say only one or two years old, would reduce overall costs. Gone is the newness, the gadgets are functional but hardly cutting-edge, and there is less status. However, also gone are the steep monthly bills and overall cost. Market exchange value is not affected as dramatically, and if an individual has saved for a down payment, has some equity in the property. Cognitive dissonance does not raise its ugly head, and all things considered, an individual has a chance to get ahead.

A couple of decades ago I tried the former approach to transportation. For the one and only time in my life, I owned a new automobile. A sports car. Yes, newness abounded, gadgets galore — and status! Three and one half years later, making accelerated payments, I ended my contracted servitude to the banker. A few years later, despite good care and because of the effects of monetary inflation and market depreciation, I sold the car for much less than what I originally paid — including the interest to the banker. Total losses: approximately $16,000. At that time, those equivalent losses would have paid fully for a single-wide manufactured home. Imagine not having a car payment or a house mortgage.

Shortly before selling the car, I decided I wanted a 4-wheel drive pick-up truck, something more suitable and functional for my needs and lifestyle. “Fully-loaded” trucks were then selling for about $20,000. Although generally 4-wheel drives hold their market exchange value better than sports cars, I already had learned my lesson with the car. Debt is bondage.

I started shopping the used market. I found a truck from a private party. The truck was fully equipped and had traveled less than 14,000 miles. I paid cash — no loans. Sixteen years later I still own that truck and I never have had an automotive bank payment since. Later that truck helped me clear my land and build my house.

But the Second Law of Thermodynamics and the resulting effects of decay are relentless. Time and mileage took a toll. Engines and transmissions wear out. The Second Law is law for a good reason.

New trucks were selling for $30,000 or more. Technology has forced almost all owners to forego weekend mechanics and instead pay experts several hundreds of dollars for basic maintenance. The choice was easy. I exchanged the original engine for a warranted rebuilt, had the transmission overhauled, and had the bench seat reupholstered. Total cost was about $4,000. Because I had taken care of the body, I basically had a new truck. No monthly payments. I was still debt free. No bondage.

Of course, my truck is functional, not fancy. For more than a decade I have not been in bondage to any automotive debt. One of the rules a good engineer learns is to design function first and form second. That rule is good for avoiding excessive debt too.

Staying debt free is possible. However, usually a debt-free or low debt life means sacrificing some status and delaying some gratification to tomorrow. Saving now and paying later enhances a life of liberty. The only question is do you want that life?


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